By Gerald L. Maatman, Jr.

The Ninth Circuit’s ruling in Stockwell v. City & Cnty. of San Francisco, Case No. 12-15070 (9th Cir.  April 24, 2014), is already sparking a debate over the meaning of Rule 23. Our posting on the ruling is here. The decision ought to be required reading for all corporate counsel concerned about workplace class action litigation.

More recently, BNA Daily Labor Report contacted us for our views on Stockwell, and it subsequently published an extensive article on the implications of the decision.

We thought our loyal blog readers would find BNA’s article to be of interest. It provides an extensive analysis of the Ninth Circuit’s opinion in the form of a point/counter-point debate of sorts with Joe Sellers of Cohen Milstein, one of the leading lights of the plaintiffs’ class action bar, asserting a view of the plaintiffs’ bar and myself on behalf of the defense bar.

Enjoy the debate!

By Gerald L. Maatman, Jr. and Laura J. Maechtlen

While much of the news this week has been focused on a decision from the U.S. District Court for the Eastern District of Virginia that declared Virginia’s ban on same-sex marriage unconstitutional, we read with great interest a separate and equally important decision from the U.S. District Court for the Western District of Virginia in which the Court granted class certification to plaintiffs who also challenged Virginia’s same-sex marriage ban in Harris et. al. v. Rainey et. al., Case No. 5:13-CV-00077 (W.D. Va. Jan. 31, 2014). In that case, the plaintiffs obtained certification for two sub-classes of plaintiffs, including: (1) same-sex couples who have not married in the state of Virginia; and (2) same-sex couples lawfully married in other states. 

It is one of the very few cases that we have reviewed that addresses claims of gay or lesbians on a class-wide basis.

Basis Of The Class Certification Order        

In its ruling, the Court dispatched with Rule 23(a) requirements fairly swiftly. The Court held that numerosity was met with a showing of census data that over 15,000 same-sex households live in Virginia. The Court found commonality among the class because, whatever factual differences exist between the putative class members, the legal relief sought is the same, i.e., a declaratory judgment striking down Virginia’s laws barring same-sex marriage, and a permanent injunction barring their enforcement. Citing Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2556 (2011), the Court found that such relief rests on identical questions of law, and would clearly resolve the issues “class-wide” and in “one stroke.” For that same reason, the Court found that plaintiffs meet the typicality requirement.  

On adequacy of representation, defendants argued that the separate case pending in the Eastern District of Virginia (Bostic v. McDonnell) precluded certification because efforts of counsel in the case to draft the Bostic plaintiffs into a non-opt-out class created a conflict. Acknowledging that the argument appears to be one in which defendants assert the Bostic claimants would be precluded from litigating their own case, the Court provided a simple response: it would exclude the Bostic plaintiffs from the class definition.

The Court addressed next the parties’ arguments on Rule 23(b)(2), and engaged in an interesting analysis regarding Defendants’ contention that the “so called” necessity doctrine preluded class certification under Rule 23(b)(2). Defendants argued that federal case law authorities apply a “need” requirement to deny class certification for suits seeking declaratory or injunctive relief under Rule 23(b)(2) where a class action is not necessary inasmuch as all the class members will benefit from n injunction issued on behalf of a single plaintiff. Recognizing that the doctrine was “highly unsettled,” the Court reasoned that “like Newton’s law of thermodynamics,  for every class denial on the basis of need, one is able to find a decision, or several decisions, often in the same circuit, where other courts have certified Rule 23(b)(2) classes under virtually the same circumstances.” Id. at 9. Ultimately, the Court distinguished case law from the Fourth and Seventh Circuits, and the District Court of the District of Columbia, in finding that such a “need requirement” does not exist in Rule 23. The Court further noted that suits brought for injunctive relief alleging civil rights violations are “precisely the type of suit for which Rule 23(b)(2) was intended to provide class certification.”  Id.

Implications For Employers

We previously warned that recent class certification rulings with respect to gay and lesbian plaintiffs signal a turning of the tide in complex litigation. While private employers need not worry about equal protection arguments, they should be aware that they are not immune from similar claims in the event they impermissibly deny certain benefits to gay or lesbian employees, either in jurisdictions that expressly protect employees from discrimination based on sexual orientation and/or gender identity and expression, or in claims that are enforced by the EEOC. Not only is the plaintiff’s bar becoming more creative and successful with these claims, but also local, state and federal law has continued to expand to protect rights for gay and lesbian employees.

By Kathryn “Chris” Palamountain and Kate Birenbaum

Containing a local business dispute that had, at least temporarily, been blown into a nationwide class action, the First District Court of the Texas Court of Appeals in Houston recently overturned a trial court’s certification of claims brought on behalf of a class of persons whose personal information may (or may not) have been obtained from the trash – the case of Bliss & Glennon Inc. v. Ashley and Ashley General Agency, LLC, No. 01-12-01177-CV, 2014 WL 47758 (Tex. App. — Houston 1st Dist. Jan. 7, 2014). In its ruling, the Court of Appeals confirmed that, because Texas Rule of Civil Procedure 42 was “patterned after Federal Rule of Civil Procedure 23, federal decisions and authorities interpreting current federal class action requirements are instructive,” including Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). Id. at *10. The ruling is instructive for all employers – and businesses – facing class litigation in Texas.

Background To The Case

The case arose after Lyle Ashley, a former employee of insurance broker Bliss & Glennon (“B&G”), founded a competing agency and began luring current B&G employees to his new business. One of the crossover employees had been head of IT at B&G.  This employee purportedly removed business information — including hard drives that contained social security numbers of individuals and other confidential third party information — from a dumpster near the B&G facilities.  After receiving complaints from customers regarding breaches of confidential information, B&G filed suit and moved for a temporary restraining order (“TRO”) to stop its competitor from using any information it may have obtained from the trash.  Ashley refused to return the items. In response to B&G’s lawsuit, Ashley filed counterclaims, including a claim under Texas’ Identity Theft Enforcement and Protection Act, on behalf of himself and a class of similarly situated persons whose information was stored on the B&G equipment that was allegedly placed in the dumpster.

The Trial Court’s Class Certification Order

To support his motion for class certification, Ashley argued that B&G’s TRO provided all the information necessary to support certification, and that B&G should be estopped from arguing otherwise. The trial court agreed and certified a nationwide class of persons whose information was stored on the computer data that the former B&G employee and current Ashley employee had purportedly found in the dumpster. B&G subsequently appealed.

The Court Of Appeals’ Ruling

The Court of Appeals noted two flaws in the trial court’s reasoning. First, it found that B&G’s TRO did not include an admission of any duty to give notice under the Texas identity theft statute. Second, in the absence of such admissions, Ashley had not submitted evidence sufficient to support class certification. The Court of Appeals noted that a trial court must “apply a rigorous analysis to determine if class certification requirements have been satisfied.” Id. at *15. In this case, the evidence before the trial court did not “affirmatively demonstrate commonality or typicality of claims.” Id. This failure was largely due to the fact that Ashley had refused to turn over the materials that B&G sought, so there was “no evidence about the members of the proposed class, or about their circumstances, their information compromised, or their possible injury.” Id.

In addition, the Court of Appeal found that Ashley’s own claims were not typical of the potential class and that he could not adequately represent the class. This was because “one of the issues to be resolved by the fact finder is how the alleged missing data came to be in Ashley’s hands.” Id. at *16. B&G alleged in the original suit that Ashley himself ordered his current employee, the former head of IT at B&G, to remove the computer materials from the dumpster. In other words, Ashley himself may be “the one responsible for the information falling into third parties’ hands.” Id. 

Implications For Employers

Texas is not considered a friendly jurisdiction for class actions in the first instance, but this case demonstrates that state courts will not hesitate to apply the same “rigorous” analysis to certification sought under the state rules that federal courts apply in actions under Rule 23 of the Federal Rules of Civil Procedure.

By Courtney K. Bohl and Laura J. Maechtlen

On September 29, 2013, Chief Judge Sharon Lovelace Blackburn of the U.S. District Court for the Northern District of Alabama in Bryant, et al. v. Southland Tube, No. 2:10-CV-3215, 2013 U.S. Dist. LEXIS 141607 (N.D. Ala. Sept. 29, 2013), denied plaintiffs’ motion for class certification finding plaintiffs failed to satisfy Rule 23(a)’s commonality and typicality requirements. The plaintiffs sought to certify a class of over one-hundred African-American workers, alleging Southland’s selection system for promotions, pay increases and training discriminated against African-American employees. Southland’s system gave supervisors wide discretion to select employees for promotions, trainings and pay increases. 

This decision is a must read for employers facing class actions based on a company practice or policy that gives decision-makers wide discretion to make promotion and compensation decisions. Judge Blackburn’s opinion demonstrates that merely showing the existence of a subjective policy, without strong statistical proof and anecdotes, will be insufficient to meet Rule 23(a)’s commonality requirement. 

Background Of The Case

Eleven named plaintiffs brought suit against Southland Tube, which manufactures an electric resistance welded tubular product, alleging Southland’s system for selecting employees for promotions, trainings and pay increases had a disparate impact on African-Americans. Id. at *1.  The plaintiffs are current and former employees of Southland who worked on the production side of its operations, referred to as “the Mill.” Id. at *6. Within the Mill, there are three layers of management — the Operations Manager, who is responsible for the entire operations of the Mill, five Superintendents, who are each responsible for one of the five distinct areas of the Mill, and Frontline Supervisors, who each oversee a particular shift within one of the five areas of the Mill. Id. at *6-7.

Under Southland’s pay and promotion system, significant weight was placed on the Frontline Supervisors’ promotion, training and compensation recommendations, although the Operations Manager ultimately approved the decisions. Id. at *8-12. Southland, however, provided only vague and subjective standards for making the recommendations, gave supervisors no written instructions pertaining to the qualifications necessary for promotions, and did not notify hourly employees of open training and promotion opportunities. Id. 

After a period of discovery, the plaintiffs filed their motion for class certification motion, seeking to certify a class of African American employees who worked at Southland Tube at any time between 2006 to the present. Id. at *30. In support of their motion, the plaintiffs  filed an expert report setting forth three main findings: (1) the distribution of hourly wage rates among African-American employees fell primarily in the lower part of the range, whereas the distribution of hourly wage rates among white hourly employees fell more evenly over the range; (2) more African-American employees were earning below the median hourly wage than were earning above the median hourly wage, whereas the opposite was true for white employees; and (3) when comparing African-American employees to white employees with the same job and years of experience, the African-American employees earned, on average, a lower hourly rate and smaller bonuses than white employees in all years except 2007. Id. at *28-29.

The Court’s Rule 23 Analysis

In considering the plaintiffs motion for class certification, the Court found that the plaintiffs satisfied Rule 23(a)’s numerosity and adequate representation requirements. Id. at *32, 46.  However, the Court found the plaintiffs failed to satisfy both Rule 23(a)’s commonality and typicality requirements. Id. at *32-46.

As to the commonality requirement, the Court first noted that the “prosecution of disparate treatment claims, ‘while not dispositive, weighs against finding the commonality and typicality required by Rule 23’” because disparate treatment claims are by their very nature individual. Id. at *34. Even if a disparate treatment claim lends itself to class treatment, the Court noted, the plaintiffs must show that the intentional discrimination was the employer’s standard operating procedure through a combination of statistics and anecdotes. Id.

The Court, relying heavily on the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2001), found that plaintiffs failed to make this showing. Id. at *36-37. The Court reasoned that merely proving an employer’s decision makers made selections based on unrestrained discretion does not show that decision makers acted with discriminatory motive toward the class as a whole. Id.

The Court then analyzed the plaintiff’s statistical evidence, opining that it was not sufficient to support a finding that discrimination was Southland’s standard operating procedure. Id. at *41-42. Although the evidence showed that more African-Americans were paid below the median wage rate and African-Americans with the same years of service and in the same position were paid less than their white counterparts, the plaintiffs’ expert testimony was “worlds away from significant proof” that Southland operated under a general policy of discrimination. Id. at *43. The Court also noted plaintiffs produced no evidence of a disparity between African-American and white employees with regard to promotions and training. Id.

The Court concluded Plaintiff’s common contention that Southland used unfettered discretion of its supervisors and lack of established procedures to intentionally discriminate against African-American employees, without any showing of statistically significant disparities between African-American and white employees, does not resolve any issue central to the validity of the class members’ pattern or practice of disparate treatment claims. Id. at *43-44. Accordingly, the Court held the plaintiffs failed to establish commonality under Rule 23(a). Id. at *44. 

Turning to the typicality requirement, the Court noted that although all the plaintiffs worked in a single location and the decisions at issue were approved by the Operations Manager, the named plaintiffs’ claims of disparate treatment are primarily individual claims. Id. The Court reasoned that some plaintiffs were employed in different positions, desired different promotions, and had different disciplinary records. Id. at *44-45. Because their experiences at Southland were varied, the Court found resolution of their claims will require numerous factual determinations, and thus do not meet Rule 23(a)’s typicality requirement. Id. at *45. 

Implications For Employers

The Southland decision demonstrates a judicial unwillingness to certify a class based on a disparate treatment theory where the statistical evidence does not provide significant proof that a defendant operated under a general policy of discrimination. The Court in Southland relied heavily on the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes in denying class certification, finding that just as in Wal-Mart, the statistical evidence did not paint a clear picture of discrimination. The Court noted that “subjective reasons are not the red-headed stepchildren of proffered nondiscriminatory explanations for employment decisions. Subjective reasons can be just as valid as objective reasons.” Id.

By Timothy F. Haley

On September 13, 2013, Judge Rosen of the U.S. District Court for the Eastern District of Michigan issued an Opinion and Order in an alleged wage suppression antitrust case certifying a class of over 20,000 Registered Nurses (“RNs”) in Cason-Merenda, et al. v. Detroit Medical Center, Case No. 06-15601, 2013 U.S. Dist. LEXIS 131006 (E.D. Mich. Sept. 6, 2013). The decision greatly raises the stakes for employers that engage in the exchange of wage information in ways that do not comply with the statements of enforcement policy issued jointly by the Department of Justice and the Federal Trade Commission (“DOT/FTC Statements”).

Background

Plaintiffs alleged that eight Detroit area hospitals had engaged in a conspiracy to suppress nurse wages in the Detroit Metropolitan Area (“DMA”). Plaintiffs alleged in count I that the defendants entered into an agreement to suppress RN wages which violated §1 of the Sherman Act per se. In count II plaintiffs alleged that the defendants exchanged RN wage information and that the effect of the exchange unlawfully suppressed RN wages in the DMA in violation of §1 of the Sherman Act under the rule of reason. In previous decisions the Court granted the defendants’ motion for summary judgment as to count I but denied it as to count II.  It also denied the defendants’ motion to exclude the testimony of plaintiffs’ expert, Dr. Orley Ashenfelter, under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). We previously blogged on these decisions here and here.

The Decision

The defendants’ challenge to the plaintiffs’ motion for class certification focused almost exclusively on the predominance requirement of Fed. R. Civ. Pro.  23(b)(3) – i.e., that questions of law or fact common to the class members predominate over any questions affecting only individual members. Id. at *22-23. According to the Court, defendants’ principal argument in this respect was that plaintiffs could not demonstrate, with proof common to the class, that each of the class members suffered injury in fact as a result of the alleged antitrust violation. Id. at *31-32.

Plaintiffs’ theory of damages in the case, both fact of injury and amount,  relied exclusively upon the expert testimony of Dr. Ashenfelter. Id. at *24. Dr. Ashenfelter proposed to show the wages that class members would have earned had there been no conspiracy to unlawfully exchange wage data (the “but-for” wages) by using a “benchmark” methodology comparing the wages paid to RNs to what the hospitals paid for registered nurses supplied by temporary agencies. Id. at *45-46. Among their challenges, defendants argued that Dr. Ashenfelter’s opinion improperly adopted a “one-size-fits-all” approach that disregarded the wide range of wages actually paid to the members of the RN class and disregarded the myriad factors, such as experience, specialized skills and department, that contribute to the wage disparities. Id. at *47. Dr. Ashenfelter himself conceded that his methodology measured only the “generic” nursing services provided by agency nurses and that it may result in understating the losses of experienced nurses. Id. at *47-48. The Court, however, rejected defendants’ argument, agreeing with plaintiffs that Dr. Ashenfelter’s opinion created a jury question concerning whether his benchmark approach provided a conservative estimate of the wages that all or nearly all class members would have earned but-for the alleged unlawful wage exchange.

The Court also cursorily rejected the defendants’ argument that Dr. Ashenfelter’s benchmark analysis could not, on a class-wide basis, demonstrate the amount of damages suffered by all or nearly all class members. The Court characterized defendants’ argument in this respect as merely a rehash of its “one-size-fits-all” argument that it had rejected in connection with the defendants’ challenge to the plaintiffs attempted showing of injury in fact. Id. at *67.

Issues And Implications For Employers

As he did in denying the defendants’ Daubert motion, Judge Rosen once again refused to resolve issues involving a “battle of the experts.” Instead, he concluded that defendants’ challenges to Dr. Ashenfelter’s opinions are issues for the jury to decide. At the class certification stage, there is at least some question as to whether these issues must be decided by the court if they are material to the question of whether a class should be certified. See Ellis v. Costco Wholesale Corporation, 657 F.3d 970, 982-84 (9th Cir. 2011) (rigorous analysis requires consideration of the persuasiveness of differing expert testimony on class issues, not just whether the testimony is admissible). There is also a significant question as to whether the use of Dr. Ashenfelter’s opinion is consistent with plaintiffs’ fiduciary duty to all class members when they concede that his methodology may result in understating losses of experienced nurses.  Id. at *47-48.  See Standard Fire Insurance Co., v. Knowles, ____ U.S. ___, 133 S.Ct. 1345, 1349 (2013) (noting that a court might find the plaintiff to be in an adequate representative due to the artificial cap he purported to impose on the class’ recovery).

But assuming this decision overcomes any subsequent challenge, it creates a significant risk for employers, particularly in the healthcare industry, that engage in the exchange of wage information in ways not sanctioned by the DOT/FTC Statements.  This is the first of the five nearly identical cases filed against hospitals in 2006 alleging an unlawful exchange of RN wage data in which the court certified a class of RNs on the issues of antitrust impact and damages. With the prospect of treble damages under the antitrust laws and large potential classes, plaintiffs’ attorneys, armed with this decision, will have an enormous incentive to pursue these types of claims in the future. Thus, employers are encouraged to examine their policies and practices regarding the exchange of wage and benefit information to ensure that they are consistent with the DOJ/FTC Statements which have previously been outlined in this blog here.

 

By Rebecca Bjork and Gerald L. Maatman, Jr.

Workplace class actions are being reshaped before our very eyes, as district courts across the country apply important new Supreme Court decisions. A new noteworthy ruling illustrating this trend in the context of Rule 23(b)(3) requirements is from a long-running employment discrimination case in New York entitled Gulino, et al. v. The Bd. of Educ. of the City Sch. Dist. of the City of N.Y., No. 96 CV 8414, 2013 U.S. Dist. LEXIS 123948 (S.D.N.Y. Aug. 29, 2013). You can read it here. Judge Kimba M. Wood of the U.S. District Court for the Southern District of New York granted plaintiffs’ motion to certify a class under that Rule 23(b)(3) and embraced their proposal for a two-stage remedial phase, even though some aspects of those proceedings will necessarily require consideration of some individualized evidence. As such, it represents a “work-around” that plaintiffs’ class action counsel have sought since the U.S. Supreme Court’s employer-friendly rulings in Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), and Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013).

Ultimately, though, we think the unique nature of the ruling in Gulino leaves plenty of room for employers facing newly-filed class actions to argue it should not carry much persuasive weight.

Background Of The Case

Briefly, the lawsuit alleges that the School Board discriminated against New York City public school teachers by requiring them in the early 1990’s to pass a licensing exam that had a disparate impact on minorities. Id. at *3-4. Thousands of them failed, and in response, according to a judgment reached after an earlier eight week bench trial, “the Board retained them in the same teaching positions and assigned the same course load, but revoked their licenses, demoted them to substitute teachers, reduced their salaries, froze their pensions, and revoked their seniority rights.” Id. at *5 (citing Gulino v. Bd. Of Educ. Of the City Sch. Dist. of City of N.Y., 201 F.R.D. 326, 329 (S.D.N.Y. 2001)). 

Initially, the previous judge assigned to the litigation had certified a class under Rules 23(a)’s commonality requirement and Rule 23(b)(2)’s injunctive class procedure. But after the Supreme Court’s decision in Wal-Mart Stores, Inc., which held that individual monetary relief cannot be awarded on a class-wide basis through a Rule 23(b)(2) injunction, the class was partially decertified on that issue. Gulino, 2013 U.S. Dist. LEXIS 123948, at *8. The latest development is that now Judge Wood has granted the plaintiffs’ proposal to certify a remedial class, to be tried in two phases, under Rule 23(b)(3) instead. 

The Basis Of The Ruling

Rule 23(b)(3)’s predominance requirement, which the Supreme Court has explained is even more demanding than commonality, “tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.” Id. at *30 (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997). Despite the higher standard, the Court in Gulino found that certifying a damages class under Rule 23(b)(3) would be “the superior method of adjudicating Plaintiffs’ remaining claims.” Id. at *37. 

For the remedial phase, “the Court agree[s] with Plaintiffs that the class shares common questions (and answers) relating to the calculation of appropriate remedies” and that the first stage “will address class-wide issues, including calculation of back pay, pension benefits, and seniority; the second stage will address individual issues, including mitigation and the amount of back pay to which each claimant is entitled.” Id. at *19. The Court embraced the use of salary tables and cohorts (based on what year the teachers would have been eligible for full-time teaching) to calculate back pay on  periodic basis. Id. at *20-21. At the second stage, the Board “will have an opportunity to present other, non-discriminatory reasons why a class member would not have received” a license or regular teaching assignment. Id. at *22. This outcome may seem surprising given that the Supreme Court’s ruling in Comcast Corp. v. Behrend requires plaintiffs to propose a model capable of calculating individual damages on a class-wide basis at the class certification stage. There, the majority stated, “respondents cannot show Rule 23(b)(3) predominance: Questions of individual damage calculations will inevitably overwhelm questions common to the class.” Id. at 2560.  

Implications For Employers

The decision in Gulino is one of the first employment discrimination class actions to certify phase two damages issues under Rule 23(b)(3). Its reasoning to get to that result is somewhat strained and convoluted. In many respects, the decision reflects the historical tendency to favor class actions in case law in the Second Circuit. For example, the Court explained that plaintiffs “have identified more than 1,000 individuals who have been harmed” by the use of the test, and requiring them to file individual lawsuits “would sacrifice the efficiencies that could be obtained by resolving common issues together and using those determinations to streamline individual proceedings.” Id. However, the procedural posture of the litigation appears to have been a crucial determining factor, for “[c]lass members have been relying on this litigation proceeding as a class action for more than seventeen years” and “forcing members to initiate separate actions at this late stage would be unfair.” Id. at *37-38. Proceedings for damages determinations “will expedite compensating Plaintiffs” who, “despite clear evidence of the [School] Board’s liability, . . . “have yet to obtain any relief.” Id. at 838. As a result, employers have a sound basis to blunt the impact of this plaintiff-friendly predominance decision in cases where facts regarding liability are still in dispute.

sdal.bmpBy Rebecca Bjork and Gerald L. Maatman, Jr.

A new Rule 23 decision caught our eye this week – the ruling in July v. Board of School Commissioners, No. 11-CV-0539, 2013 U.S. Dist. LEXIS 74500 (S.D. Ala. May 28, 2013). This decision to deny class certification matters because it shows how plaintiffs’ continuing attempts to use (abuse?) the rule authorizing mandatory (non-opt-out) class actions for what is clearly non-injunctive relief under Rule 23(b)(2) are being shut down by courts more and more after Wal-Mart v. Dukes, 131 S. Ct. 2541 (2011). It also matters because it underscores how employment decisions often are made in ways that do not to meet the predominance requirement of Rule 23(b)(3). Our blog readers should definitely take the time to review this one and keep it in mind when facing a class certification motion.

 In July, the named plaintiffs were seven African-American associate principals employed by the school district in Mobile County, Alabama. They sought to certify a class on disparate impact and pattern or practice grounds, based on allegations that African-American assistant principals were assigned to act as principals only in predominantly African-American schools, while White principals were assigned to so act in predominantly White schools.  2013 U.S. Dist. LEXIS 74500, at *1-2. They sought class certification under Rule 23 seeking injunctive and declaratory relief to stop the practice, and also back pay, front pay, offers of promotion, and compensatory damages. Id. at *2.

The Court first considered the plaintiffs’ request for certification under 23(b)(2). It denied the request for two reasons. First, the Court found that the defendant’s argument that all employment decisions were made “on the basis of factors other than” race — one of the defenses it is entitled to under the burden-shifting framework of Int’l Brotherhood of Teamsters v. United States, 431 U.S. 324, (1977) — “dooms the plaintiffs’ request for certification under Rule 23(b)(2).” Id. at *10. This was so because individualized evidence would be required to try that defense, and Rule 23 (b)(2) envisions all-at-once relief. Second, the assistant principals sought compensatory damages, which by their nature are individual — e.g., a claim of emotional distress requires an assessment of each person’s emotional response to the discrimination. 

The Court then took a deep dive into the Rule 23 (b)(3) requirements and also found the plaintiffs’ proof lacking. Not only would each class member have to establish that they applied for a position and was denied it (or would have, but for the Board’s discriminatory action), but also the Board had the right to rebut the allegation with proof that positions were not offered for lawful reasons. Id. at 14. This defeats predominance because “the Court would have to make a number of individual determinations in deciding which of the minority employees were the actual victims of the company’s discriminatory practices.” Id. at *14-15 (quoting Teamsters, 431 U.S. at 371-72 ). 

The Court ultimately concluded that this would be no small task — in fact the judge wrote, “As this case reflects, certification of  a Title VII pattern or practice class action under Rule 23(b)(3) is extremely problematic.” Id. at 27-28. It then concluded that the plaintiffs’ disparate impact class theory must not be certified for the same reasons — legitimate, non-discriminatory reasons offered in rebuttal by the employer are simply too individualized.

As we have pointed out here before, we do not believe that workplace class actions are dead after Wal-Mart v. Dukes. Reading this case reminds us, however, that in fact, based on longstanding Supreme Court precedent, they should have been much harder to sustain a long, long time ago. 

WCA2011.jpgSeyfarth Shaw’s 2011 Workplace Class Action Report is coming soon! The report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation. Our loyal readers can expect to receive their copy in several weeks, with rulings and case law developments reviewed and analyzed through December 31, 2010.

To say the least, 2010 was a significant year for workplace class action litigation. We will address these developments in detail in the upcoming Report, and this post provides a preview.

 

Key developments over the past year manifest multiple trends that impact employers.

First, 2010 was the year of big headlines in employment discrimination class actions.  Those headlines involved the biggest class action trial verdict ever – the $250 million verdict in Velez, et al. v. Novartis in May of 2010 – and its subsequent settlement two months later for $175 million.  As success by the plaintiffs’ bar often prompts copy-cat litigation filings, these headlines are likely to encourage more class actions in the future, as well as enhanced settlement demands by the plaintiffs’ bar to resolve their cases.

SupremeCourt.jpgSecond, 2010 also spawned landmark Rule 23 decisions; none was more momentous than the ruling by the Ninth Circuit in Dukes, et al. v. Wal-Mart Stores, Inc. on April 26, 2010, and the subsequent grant of certiorari in the case by the U.S. Supreme Court on December 6, 2010.  In a 6 to 5 en banc opinion, the Ninth Circuit upheld, in part, certification of the largest employment discrimination class action ever – a pay and promotions class of approximately 1.5 million female workers.  The Supreme Court’s grant of certiorari put the Ninth Circuit’s decision in flux and other decisions on hold, while the class action bar awaits the next chapter in the litigation.  The Supreme Court’s expected ruling in Dukes in 2011 is apt to be a bellwether decision in areas that the Supreme Court has left mostly to federal circuit courts of appeals in recent years. 

Third, the continued economic challenges and low hiring rates during 2010 fueled more class action and collective action litigation.  Most significantly, the plaintiffs’ bar increased the pace of FLSA collective action filings seeking recovery for unpaid overtime wages.   These conditions spawned more employment-related case filings, both by laid-off workers and government enforcement attorneys.  In turn, this resulted in higher settlement numbers (especially in government-initiated lawsuits and wage & hour litigation).  Even more class action litigation is expected in 2011, as businesses continue to re-tool their operations.

Map.jpgFourth, by sheer numbers, wage & hour litigation continued to far out-pace all other types of workplace class actions.  This trend was also manifest in more wage & hour class action and collective action decisions by federal and state court judges than any other area of workplace litigation.  It also reflected the fact that in terms of case filings, collective actions pursued in federal court under the Fair Labor Standards Act (“FLSA”) outnumbered all other types of private class actions in employment-related cases.  As a result, FLSA collective actions produced more rulings in 2010 than class actions for employment discrimination or under ERISA.  Significant growth in wage & hour litigation also was centered at the state court level, and especially in California, Florida, Illinois, New Jersey, New York, Massachusetts, Minnesota, Pennsylvania, and Washington. This trend is likely to continue in 2011.

Fifth, as Democratic legislative initiatives for labor and employment reform stalled, in the wake of Republican Congressional gains, the Obama Administration continued to ramp up its enforcement efforts through the U.S. Equal Employment Opportunity Commission (“EEOC”) and the U.S. Department of Labor (“DOL”).  The Obama Administration’s emphasis on administrative regulation and enforcement lead to more government-initiated litigation over workplace issues.  Those efforts are expected to intensify as the Administration’s policy goals, which may be thwarted in the Congress, are advanced through agency regulation and government enforcement litigation.  Many state labor departments are following this lead. Increased funding for the DOL and the EEOC also resulted in the recruitment and training of more DOL and EEOC attorneys and investigators.  It is expected that employers will encounter more investigations – and more governmental enforcement lawsuits – in 2011 as the augmented staffs of the DOL and EEOC carry out their law enforcement functions.  Likewise, when measured by monetary recoveries, government enforcement litigation resulted in higher settlement amounts for workplace litigation than past years.  Even more aggressive government enforcement litigation is likely in the coming year.

scalesofjustice.jpgSixth, the Class Action Fairness Act of 2005 (“CAFA”) continued to have significant effects on workplace litigation, and most significantly on wage & hour class actions filed in state court.  The past twelve months saw evolving case law developments on jurisdictional issues under the CAFA.  As the plaintiffs’ bar continues to devise techniques to adapt to the CAFA, rulings on the scope, meaning, and application of this law, of relatively recent vintage, have occurred at a surprising rate.  In this respect, the development of CAFA-related law continued to mature quickly in the Ninth Circuit, as the high volume of California-based wage & hour class action filings resulted in a deluge of CAFA removals in California federal courts in 2010.

Seventh, and finally, the financial stakes in workplace class action litigation increased in 2010.  Plaintiffs’ lawyers have continued to push the envelope in crafting damages theories to expand the size of classes and the scope of recoveries.  These strategies resulted in a series of massive settlements in nationwide class actions, particularly in the context of wage & hour litigation.  This trend is also unlikely to abate in 2011. 

Co-authored by Rebecca Bjork and Brandon L. Spurlock

The Federal Judicial Center recently released new recommended class action notice forms – including a notice checklist and a plain language guide – to help attorneys and judges create more effective notices and notice plans for Rule 23 certification orders.  View Notice Checklist and Plain Language Guide.

The checklist provides overall guidance on Rule 23 notice and notice plan development. A graphical plain language guide also explains and highlights the important features of the illustrative notices. This guide ought to be required reading for corporate counsel and class action defense counsel, for Judges are apt to utilize this resource on a going-forward basis when reviewing and passing upon certification orders relative to notices to a class.                

The Federal Judicial Center is the research and education agency of the federal judicial system. It was established by Congress to promote continuing education and training for federal judges; develop recommendations about the operation of the federal courts; and conduct and promote research on federal judicial procedures, court operations, and history.

Co-authored by Dana Howells and Brandon L. Spurlock

Like all federal courts, the U.S. District Court for the Central District of California has promulgated Local Rules  that have the force of law to the extent they do not contravene the Federal Rules of Civil Procedure. The Local Rules need to be taken seriously, including Local Rule 23-3’s requirement that a motion for class certification be filed within 90 days from service of the pleading that commences a class action. In an FLSA opt-in collective action, Plaintiffs filed their motion for certification on the last day allowed by Local Rule 23-3 , July 19, 2010. The Court rejected the filing for technical defects (due to the wrong hearing date, trial date and pre-trial conference date). Plaintiffs attempted to re-file, but technical defects remained, so the Court rejected the second attempt. Plaintiffs then filed an ex parte application on both procedural and substantive grounds seeking relief from the deadlines imposed by Local Rule 23-3. Defendant argued that Plaintiffs had not shown the elements of excusable neglect and that delay was prejudicial because of the extremely tight timeframes for discovery and opposition. The Court denied the ex parte application. Then Plaintiffs filed a “Motion for Extension of Time to Re-submit Motion for Class Certification Pursuant to Fed. Rule Civ. Proc. 6(b)(1)(B), or in the Alternative, Withdrawal of Seventeen Opt-in Consents filed with the Court.” The Court considered this second try a motion for reconsideration. Motions for reconsideration are limited (by Local Rules) to unusual situations where there is a material difference in fact or law from what was originally presented to the Court (which could not be discovered by reasonable diligence) or changes in governing law, emergence of new facts, or clear error. Plaintiffs argued that because they pursued claims as an FLSA opt-in action under 29 U.S.C. 216(b), the requirements of Rule 23, Fed. R. Civ. Proc. and Local Rule 23-3 did not apply. The District Court held that while “opt-on” class actions are different, they still need to be certified, and the only way to obtain certification is by timely motion. Local Rule 23-3 applies to all pleadings filed to commence a class action. The sole exception is for actions brought under the Private Securities Litigation Reform Act.